Biggest 401K Mistakes

A lot of people are misinformed about 401K that they accept advices from different people without checking whether it would be beneficial to them. And more often than not, they end up with lesser or, worse, even no money remaining in their retirement fund. Here are the following options about 401K that you should avoid at all cost.

Opting out – Getting into a company’s 401K plan is voluntary, you may or may not be required to participate. Not choosing to participate in this benefit would be the biggest mistake you could commit, as a company-sponsored 401K plan is the easiest way to save for retirement.

Not contributing enough – If your company offers to match the amount of money you are contributing to your 401K, then take advantage of it. Not contributing enough would only deprive you of free money that you can save for your retirement.

Forgetting about your plan – Review your plan regularly, as it can maximize your investments and make the most of your plan. Even though you would think you could set it and forget it, 401K is not the case.

Stocking up on company stock – There are a variety of investment options available for 401K, but investing too heavily in your company stock is a mistake. Allocating your assets poorly can only make the least of your investment dollars. However, some companies only offer their company stock in ther retirement plans.

Cashing out – Never ever use the 401K plan as a source of funds. The money that you withdraw before retirement will be subject to taxes and a hefty 10% early withdrawal penalty. Plus, it would not be there to continue growing into your retirement. However, if you need funds immediately and there is no other alternative, withdrawing from your 401K should be your last option.

 

Posted by Ardent Editor on Jun 23 2008 in 401k & Company Plans

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